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MEETING THE CHALLENGE TO REAUTHORIZE TEA-21 65 lation includes the above low-hanging fruit except for their motor vehicle excise tax, with 10 legislatures indexing. Transportation Weekly calculates that the mea- expressly voting to raise taxes (between 2.6 cents per gal- sure, if enacted, would bring in about $3 billion in FY lon in Maine and 5 cents per gallon in Utah) and five 2004 and perhaps $7 billion in FY 2009. These numbers states increasing their excise annually (through automatic are difficult to predict since the unobligated balance, on indexing, without legislative action). which interest would be predicated, is an enigma within a riddle. Together, these measures would get us to between Tax Credit Bonds $33 billion in 2004 and perhaps $42 billion in 2009. A significant gap would still need to be filled to reach a As John Horsley recently outlined for Congress,12 $50 billion target (to meet the cost to maintain condi- AASHTO is exploring the feasibility of leveraging new tion) or a $60 billion target (to meet the cost to maintain revenues through a Transportation Finance Corporation performance). (TFC), which, among other things, would issue approx- ARTBA and the American Society of Civil Engineers imately $60 billion in bonds between 2004 and 2009. (ASCE) propose to tackle this gap head-on, albeit in dif- TFC would distribute approximately $35 billion of the ferent ways. ARTBA became the first major group to bond proceeds to the highway program through FHWA advocate publicly a gas tax increase beyond indexing according to an apportionment formula determined by inflation. Its "Two Cents Makes Sense" plan incorpo- Congress (perhaps similar to the current federal-aid rates all the low-hanging fruit mentioned earlier and highway funding formula), and approximately $8.5 bil- proposes other measures: lion would be distributed to transit agencies on a basis to be determined. From the recipients' perspective, these Assessing six annual $0.02 increases in the fuel funds would essentially be indistinguishable from regu- excise tax over the reauthorization period; lar federal-aid apportionments. The states would not be Providing automatic adjustments in the fuel tax rate liable for the repayment of the bonds. if the Highway Trust Fund experiences deficits during any TFC would set aside at issuance and deposit into a fiscal year; sinking fund approximately $17 billion of the bond pro- Adopting true pay-as-you-go funding, which ceeds, which would be invested in federal agency or would replace TEA-21's current requirements that rev- other high-grade instruments. According to Horsley, at enues be deposited in the Highway Trust Fund and maturity the sinking fund would have grown sufficiently "warehoused" a year before apportionment to the to repay the bond principal. states; and In lieu of interest, the bondholders would receive tax Including a "maintenance of effort" provision that credits that could be applied against the holder's federal would make state access to increased apportioned federal income tax liability. Such tax credits would themselves funds contingent on state investment levels consistent represent taxable income to the holders. Horsley sug- with prior investment. gests that a new source of income be found to produce additional Highway Trust Fund receipts that would ASCE recently joined ARTBA in calling for a fuel tax reimburse the Treasury for the budgetary cost of the tax increase.11 Its proposal recommends expenditures associated with the tax credits. AASHTO is still investigating the strengths and Indexing the gas tax to the CPI, weaknesses of this proposal. Moreover, the General Raising the gas tax by $0.06 per gallon at the Accounting Office, at the request of the Senate onset of reauthorization, and Committee on Finance and the Senate Committee on Decreasing the volatility of RABA adjustments. Environment and Public Works, is including the tax credit bond proposal in its examination of a range of Many even discount the possibility of serious consid- alternative financing approaches for surface transporta- eration, much less passage, of gas tax increases next year. tion.13 In the meantime, Senator Baucus is acting. On Some would respond that President Reagan could sup- October 10, 2002, he introduced the MEGA Trust Act, port a significant gas tax increase in the economic envi- ronment of 1982, and the justification today may be equivalent or better. Moreover, experience at the state level is a useful reference. Since 1997, 15 states increased 12 Testimony of John Horsley, AASHTO, before a Joint Hearing of the Senate Committee on Finance and the Senate Committee on Environment and Public Works, Sept. 25, 2002. 11Testimony of Thomas Jackson, ASCE, before the Subcommittee on 13 Statement of Jayetta Hecker, General Accounting Office, before a Transportation, Infrastructure, and Nuclear Safety, Senate joint hearing of the Senate Committee on Finance and the Senate Committee on Environment and Public Works, Sept. 30, 2002. Committee on Environment and Public Works, Sept. 25, 2002.